Mortgage rates prove attractive

GOING FROM RENTING TO BUYING

In a graphic on the front of today's Real Estate section, the line depicting the cost of buying a home and the line showing the cost of renting are reversed.

The Sun regrets the error.

This is the summer that Beth and James Clatterbuck have the thrill of leaving their cramped Columbia apartment for their first home: a 75-year-old cottage in Dorsey with cedar siding and three bedrooms.

FOR THE RECORD - CORRECTION

The best thing about the deal? The young renters -- he's a house painter and she's an office manager for a car dealership -- can accomplish the housing leap with a $200 increase in monthly, out-of-pocket expenses. Moreover, interest on their home mortgage will be tax deductible.

"The moral of the story is that for renters like the Clatterbucks, this is the best time ever to buy," says Lynn Sherrock, the RE/MAX agent assisting the couple -- still in their early 20s -- on the purchase of the cottage.

The lowest mortgage rates in two decades, moderate home prices, creative financing products, and an ample supply of housing units on the market, are combining to make this spring one of the best selling seasons for first-time buyers, realty experts agree.

"This is the first time in a long time that newlyweds and young singles are able to afford a first-time starter home because of the monthly costs that are involved," notes James O'Conor, chairman of O'Conor, Piper & Flynn, a Timonium-based realty chain that leads the Baltimore-area in home sales.

To be sure, many renters remain too jittery about the economy and about whether their jobs are secure to purchase a home. Still, first-timers are a rising percentage of buyers in the housing market, according to statistics from Fannie Mae, a Washington-based corporation that buys and sells mortgages on the secondary market.

First-time buyers -- virtually all of them renters -- are the buyers of 48 percent of the housing units sold, says David Berson, Fannie Mae's chief economist. The comparable figure was 39 percent throughout the 1980s.

Many would-be buyers who now rent are pleasantly surprised when they crunch numbers and discover they are capable of making a purchase, Mr. Berson notes.

Albert and Kimberley Clark, for example, say they would have bought a home long ago if they had thought they could afford the costs.

Mr. Clark, 44, and Ms. Clark, 29, a two-career couple from dTC Baltimore County, knew they would be happier as buyers instead of renters.

"I always thought about buying and didn't think we could afford it, or didn't know exactly how much money we'd have to come up with," Mr. Clark says. So, needing more space, the Clarks asked Grempler Realty, based in Baltimore County, to help them find a larger rental.

"We were looking at $650 for a three-bedroom, one-bath rental," Mr. Clark said. "The agent made me realize we could find something to purchase."

As a military veteran, Mr. Clark qualified for a no-money-down Veterans Administration loan. The Grempler agent helped them find a home to buy for $617 a month. To sweeten the deal even more, the seller agreed to pay for half of the closing costs, about $2,000 of the $4,000 the Clarks would owe at settlement.

Unlike those who already have homes and must sell their property before moving up, renters such as the Clarks are recognizing they can make an easier transition into their next housing unit and the numbers reflect those hopes.

In a recent Fannie Mae survey of 2,000 Americans, 59 percent of the renters said it would be easier for them to buy a home today than a year or two ago.

Among the renters questioned in the survey with household incomes above $20,000, 12 percent expect to purchase a home in the next three years. Further, 57 percent of the renters surveyed by Fannie Mae believe they could now qualify to buy a home.

The biggest factor propelling renters into the home-buying market is low interest rates. For April of this year -- the most recent month for which Fannie Mae has average mortgage rate figures -- rates throughout the United States for fixed-rate, 30-year financing averaged 7.3 percent. That compared to 8.68 percent in April 1992.

Besides low interest rates and moderate home prices, another factor enabling many renters to move into homeownership is the array of lender-sponsored plans that help reduce the cash requirements for a purchase.

To buy their cottage in Dorsey, for example, the Clatterbucks needed only a few thousand dollars in cash for the $90,000 purchase. That's because they willingly traded a mortgage rate slightly above the prevailing market rate in exchange for a loan with very low closing costs, explains their agent, Ms. Sherrock, who sells property through the RE/MAX Advantage realty office in Columbia. Their new monthly housing payment will be about $800.